Steering a Restrictive Course: Rebooting China’s Charity Law

1 Strengthening the Leadership of the Communist Party over the Charitable and Civil Society Sector

The draft amendments further reassert the leading role of the Chinese Communist Party over the charity enterprise and charitable organizations in China. The NPC Standing Committee’s Decision on Amending the Charity Law of the People’s Republic of China included amending the Law to state that “Charity work adheres to the leadership of the Communist Party of China.” (Charity Law of the People’s Republic of China 2023, Article 29).

Chinese policies and practices in the Xi Jinping era overwhelmingly emphasize Party control over not only policy but day-to-day practice, but that does not seem to have been clear enough to forestall this Party-focused amendment. And, in the Party-focused world of 2023 Beijing, this may be understandable. It may be that most or many statutory amendments now need to include this provision if the law did not have it stated clearly before.

The previous Charity Law, before this amendment, did not mention Party leadership. The specific article amended on December 29, Article 4, previously stated that “The implementation of charitable activities shall follow the principles of lawfulness, voluntariness, integrity, and non-compensation; must not violate social morals, and must not harm national security, the societal public interest or the lawful rights and interests of others.” (Charity Law of the People’s Republic of China 2016, Article 4) That Article now explicitly includes the Party leadership language noted above, an issue emphasized by Party-focused legislators and others.

2 Strengthening Supervision and Control over Charitable Work Across the Country

The 2023 amendments to the Charity Law also strongly reassert state control and supervision over charitable activity, another concern in the Xi Jinping era of centralized and harder governance.

The amended Article 6 requires that “People’s governments at the county level and above shall plan, coordinate, supervise and guide relevant departments to do a good job of supporting the development and standardizing management of charitable work….” Article 6 reiterates that later with another new amendment that requires governmental units to “strengthen the oversight, management, and services of charitable activities” and requires the professional supervisory units of charitable organizations (often the relevant functional government bodies, such as an education bureau for an education charity) to “guide and supervise them.” (Decision of the Standing Committee of the NPC 2023).

This amendment results from a sense since 2016 that the county level administration of charities has been loose and weak, and the professional supervisory bodies (usually government units) have not taken up their supervisory and guidance duties either. In both cases, this is a call to more control and supervision over charity formation, registration, operations, and supervision, and, more broadly, a call to more effective public welfare activities (Jia 2023). Legislators also debated these issues, with an overall consensus toward more control and supervision.

3 The Problem of Fundraising Regulation

The draft amendments to the Charity Law, and particularly their revision while the draft was being discussed within the National People’s Congress, reflect a deep concern about the implications of expanded fundraising around China. In particular, Chinese Party and state officials have been quite concerned about the potential for loss of control over fundraising and for fraudulent practices in fundraising.

Because of these concerns, in the Charity Law amendments the drafters and the National People’s Congress declined to open up public fundraising to a wider array of Chinese entities permitted to raise funds. The amendments also tightened the requirements for approval of internet, crowdfunding mechanisms by requiring that the approval of such platforms be done at the provincial level, not at the county level (Jia 2024; Tsai and Wang 2019).

4 The Ongoing Problem of Charitable Tax Policy

In its review of the draft amendments to the Charity Law, the Constitution and Law Committee of the NPC put the tax problem rather clearly: “Some members of the Standing Committee, relevant departments [of the government], and the public [have] put forward some specific opinions on improving preferential tax measures” for charities and donors (Report on the Revision Opinions Expressed in the ‘Decision of the Standing Committee of the National People’s Congress on the Revision of the Charity Law of the People’s Republic of China’ 2023). In other words, some participants and advocates pushed strongly for new and more favorable tax preferences to be named or strongly signaled in the amendments to the Law, as a way of pushing the preference agenda forward.

The Constitution and Law Committee of the NPC rejected this more reformist and faster approach to tax preferences. “After study, the Constitutional and Law Committee believes that some of the issues involved … can be stipulated in supporting laws and regulations, and some can be resolved by strengthening the implementation of laws [meaning both the Charity Law and tax laws]; it is recommended that relevant parties speed up the improvement of supporting provisions, do a solid job in legal publicity and implementation, and ensure that the various systems prescribed by law are implemented.” (Report on the Revision Opinions Expressed in the ‘Decision of the Standing Committee of the National People’s Congress on the Revision of the Charity Law of the People’s Republic of China’ 2023).

In other words, the Constitution and Law Committee recommended that the National People’s Congress Standing Committee not short circuit the tax drafting process by including more or different preferential policies in the amendments to the Charity Law, an unsurprising result given the restrictiveness and control featured in these and other amendment processes.

5 Linking Domestic Regulation to the Increasingly Constrained Regulation of Overseas Charity and Philanthropy in China

After the Charity Law was originally adopted in 2016, China had also enacted the Overseas NGO Law of the PRC, which restricted and constrained the work of overseas foundations, charities and other nonprofits in China, putting them under the dual control of a professional partner (professional supervisory unit) and the relevant units of the Ministry of Public Security.

This “securitization” of overseas (including Hong Kong, Macao and Taiwan) philanthropic and charity work in China quickly cut off funding links between overseas organizations and domestic Chinese organizations that were not registered under the Charity Law or other enactments, because the drafters explicitly sought to limit foreign donations to legal, registered domestic groups.

There was a lacunae in the domestic Charity Law, however. It had not fully required that domestic charitable organizations to report their donations from and interactions with overseas philanthropic and charitable groups as a way of enabling the Party and state to track external philanthropic and charitable activity. The 2023 amendments to the Charity Law closed that gap, now explicitly requiring in Article 102 that domestic charitable organizations report their receipts from overseas groups and their activities with them.

Thus Article 102 of the amended Charity Law now provides “The state is to encourage international exchanges and cooperation on charity. Where charitable organizations receive overseas donations or cooperatively carry out charitable activities with foreign organizations, approval or filing procedures are to be performed based on relevant state provisions.” (Charity Law of the People’s Republic of China 2023).

6 The Explicit Recognition of Community Charitable Practices

Community foundations and other charitable practices have grown in recent years, particularly during the Covid pandemic. The original 2016 Charity Law did not regulate this lower-level community activity, but it is recognized and now covered in the 2023 amendments to the Charity Law. Article 96 of the amended Law notes that “The state encourages the establishment of community charity organization in places where conditions permit, strengthens the construction of community volunteer teams, and develops community charity.” (Charity Law of the People’s Republic of China 2023).

As always, in China, such recognition is a double-edged sword. On the one hand, advocates of community-based charitable work will welcome this formal recognition in the main national law on domestic charity. On the other hand, to the degree that some of these community charitable practices may have come a bit under the radar of local authorities, they are now explicitly targets for regulation and control by being mentioned in the amended Charity Law.

7 Regulating Emergency Charitable Giving

The new amendments to the Charity Law also deal explicitly with regulating charitable giving in emergencies, a response to gaps in regulation during Covid and other emergencies. The recognition of this important field of charitable activity will be welcome to many in China, but as with the explicit mention of community charitable activity the field is now open to significant regulation in a control-focused time of Chinese policy.

The drafters recognized that the special aspects of emergency charitable giving involve coordinating across a variety of institutional and geographic sectors in emergency situation, making special provisions more acceptable as a policy tool in such situations.

8 What Comes Next

With the Chinese National People’s Congress now having made these controlling and technical amendments to the Chinese Charity Law, a key question in China is what comes next. Professor Deng Guosheng of Tsinghua University, a longtime observer of charity policy in China, has emphasized that the revision of the Law is only the first step if the authorities are serious about improving charitable policy.

Deng writes that “[T]he promulgation of legal policies is only a good start, and the effects … will mainly depend on implementation….” He calls for evidence-based policy decision making on charitable policy and the drafting of “detailed rules or supporting measures as soon as possible.” Deng cites a controversial area among Chinese charities:

“[T]he standards for the annual expenditure, management expenses and fundraising costs of charitable organizations to carry out charitable activities not only involve the standardized management of charitable organizations, but also affect [their] operational efficiency … , which indirectly affects the credibility of charitable organizations.”

These are important, interlinked problems, Deng is saying, and he enjoins the government departments responsible to set these standards carefully. “These standards are formulated by the civil affairs departments of the State Council together with finance, taxation and other departments. In the future they must make the standards more scientific and reasonable on the basis of investigation, research and full demonstration.” (Deng 2024).

Professor Lan Yuxin notes that the amendments to the Charity Law have certainly not solved all the issues that have plagued the charity field in China. He notes carefully that “the revision of the Charity Law still has deep-seated obstacles in optimizing the relationship between the government and charitable organizations, reducing administrative supervision, improving the registration, identification and withdrawal system of charitable organizations … and implementing tax preferences for charitable trusts” and other charities. “These may be left to be solved in the future.” (Lan 2024).

9 Important Remaining Problems

The 2023 amendments to China’s primary domestic statute regulating the nonprofit sector were control-focused and sought to deal – still in a control-focused manner – with some practical problems in charity policymaking. The drafters were responsive to the political necessity of emphasizing Party predominance and controls on the nonprofit sector. And many issues, including expanding tax preferences, have been left to the future.

At the same time, there are other changes in China’s coordination of nonprofit, charitable and philanthropic activities that are occurring as the Charity Law is being adjusted for the current era.

Perhaps most importantly, China has established a Communist Party coordinating group on social policy, the Central Social Affairs Department, which will direct policy on social affairs policies, social organizations, volunteering, grassroots governance, national industry associations and chambers of commerce, non-public enterprises, citizens’ petitions, and other aspects of social control and governance.

These important areas are jurisdictionally split among a wide range of government departments, including the Ministry of Civil Affairs and many others, and so this new coordinating group is intended to bring together policy making in this area (Sidel 2024).

Coordination and central control are also at the top of the policy agenda with respect to overseas nonprofit and philanthropic organizations. The Overseas NGO Law of the PRC was the key expression of greater control when it was enacted in 2016 and in the years since, this new framework, directed by the Ministry of Public Security, has come to envelop and superintend virtually all overseas nonprofit and philanthropic activity in China (Sidel 2018).

The amended Charity Law is entirely complementary to these other developments. In the fully Party-oriented world of Chinese policy in 2023, there was no alternative to the restrictive and limited amendments to the Chinese Charity Law that emphasized the control functions of this most important domestic statute on the Chinese charitable sector.

Over time, we may be able to locate more generalizable implications we can learn from this revision process in China that are relevant to other jurisdictions, and perhaps particularly other authoritarian jurisdictions. For example, China’s decision to both strictly control and yet encourage the development of some forms of community philanthropy may be instructive in other contexts. And the political and regulatory interplay of institutional actors and political policy in China, leading to a more limited amendment process rather than a full-scale revision of the Law, may also be instructive in other contexts.

But the debates will not end, and reformers seeking some further openings in the Chinese charitable system and its relationships to the Chinese Party and state will continue seeking opportunities to advocate for broader reforms. In the meantime, China has reenacted a domestic charity statute that responds to serious problems in the Chinese nonprofit system in controlling and pragmatic ways that Chinese charitable and nonprofit organizations will be assessing and coping with for years to come.